Renewed protests in Kenya against the Finance Bill 2024 raise fears of violence, impact on safety, investment, and government debt.
Kenyans resumed protests Tuesday against the Finance Bill 2024, despite President William Ruto’s assurance of a peaceful response from security forces.
Dubbed “#OccupyCBDTuesday“, were infiltrated by “goons” to commit violence and theft as was witnessed in Nairobi, Kenya’s capital.
Consequently, the bi-weekly protests have forced most businesses to remain closed. The protests began on Tuesday, June 18.
Initial demonstrations started peacefully but turned violent on June 25th, with clashes between protesters and police.
The Kenya National Commission on Human Rights (KNCHR) reported 39 deaths and 361 injuries during earlier protests, with some claiming excessive force by police.
The fatalities were reported across various counties: Nairobi (17), Nakuru (3), Laikipia (1), Narok (1), Kajiado (3), Uasin Gishu (4), Kakamega (1), Kisumu (2), Kisii (1), Mombasa (3), Siaya (1), Kiambu (1) and Nandi (1)
The commission documented 32 cases of enforced or involuntary disappearances. In addition, it recorded 627 instances of protestors being arrested.
“The Commission continues to condemn in the strongest terms possible the unwarranted violence and force that was inflicted on protesters, medical personnel, lawyers, journalists, and on safe spaces such as churches, medical emergency centres and ambulances. We maintain that the force used against the protestors was excessive and disproportionate,” added the statement issued on Monday.
The Directorate of Criminal Investigations (DCI) is investigating reports of gang activity during protests and vows to hold those involved accountable.
“Further, any future acts of violence leading to loss of lives, and/or destruction of private and public property, moreso critical infrastructure including Parliament, Judiciary, National and County Government facilities shall be met with the fullest force of the law,” Director of Public Prosecutions Renson Ingonga said on Monday.
Economic Disruptions
According to market analysts, Kenya faces fiscal challenges as the new financial year (2024/25) begins as a result of the government’s ability to manage its spending and debt.
Kenya’s total public debt has climbed rapidly to KES 10.4 Trillion (from KES 8.6 Trillion in June 2022), and servicing this debt become increasingly costly with high interest rates.
The country’s total public debt to GDP ratio currently stands at 69.7%, higher than the 55.0% preferred by the World Bank and the International Monetary Fund (IMF).
In the previous fiscal year (FY 2023/24), Kenya faced a major gap in its external financing needs with a shortfall of KES 168 Billion. This was partly due to delays in receiving funds from the International Monetary Fund (IMF).
“With this financing still uncertain with regard to the quantum and its timing, concerns over the potential weakness in sourcing external budgetary financing (KES 339Bn this fiscal year) is growing,” says NCBA in its Weekly Fixed Income Report – 1st July 2024.
“For the FY’2023/2024, we do not expect the government to meet its revenue collection target having collected KES 1,928.8 billion, equivalent to 78.7% of the revised estimates of KES 2,452.1 billion for FY’2023/2024 and 85.8% of the prorated estimates of KES 2,247.8 billion in the first eleven months of FY’2023/2024,” Cytonn Investments said in its H1’2024 Markets Review.
Consequently, the Finance Bill 2024 withdrawal has led to a sharp drop in expected revenue. The bill was to increase revenue by KES 302.0 billion to support the government’s budget of KES 4.0 trillion for the fiscal year 2024/2025, and to address a budget deficit of KES 597.0 billion.
An early supplementary budget will likely raise the government’s domestic borrowing target above the current KES 257 Billion.
“Going forward, we believe that the withdrawn Finance Bill will force the government to borrow more to finance the fiscal deficit owing to reduced revenue collection. We therefore expect the government to cut on its expenditure, mostly the development expenditure to finance the growing debt maturities and the ballooning recurrent expenditure,” adds Cytonn Investments.
NCBA and Cytonn both warn that the withdrawal of the Finance Bill 2024 could negatively impact investor confidence, “especially if the market perceives it as a sign of political or economic instability, and could impact both domestic and foreign investment inflows. “
